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U.S. dollar keeps gains

TOKYO&ndash;The U.S. dollar steadied against the euro and yen on Friday, retaining gains made the previous session on the view that the Federal Reserve may keep interest rates on hold for some time.

Thu., March 22, 2007

TOKYO–The U.S. dollar steadied against the euro and yen on Friday, retaining gains made the previous session on the view that the Federal Reserve may keep interest rates on hold for some time.

The Fed left the funds rate unchanged at 5.25 per cent on Wednesday but eliminated a reference to possible further rate hikes in its post-meeting statement.

Investors at first took the shift as a sign that a rate cut may be near, selling the dollar to a two-year low against the euro.

But investors soon started to consider that the Fed may not be in hurry to cut rates and that the dollar might be oversold, as the U.S. central bank also reiterated that inflation was still its main concern.

"The Fed changed its bias to neutral, that's all," said Nobuo Ibaraki, forex manager at Nomura Trust and Banking. "The statement was not something that suggests a rate cut, while the central bank mentioned inflation worries."

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The euro traded at $1.3330 (U.S.), unchanged from levels in late New York trade on Thursday. The single currency on Thursday climbed as high as $1.3412, the highest since March 2005.

The euro barely budged against the yen at 157.45 yen from late U.S. trade.

The dollar was unchanged versus the yen at 118.15 yen after gaining 0.4 per cent in the previous session.

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